A dangerous precedent

The start of bankruptcy proceedings for Spain’s AP41 Madrid-Toledo toll road could set a precedent that may end up being emulated by several other troubled concessionaires.

A storm is brewing in Spain after the concessionaire of the AP41 toll road, connecting Madrid to Toledo, filed for bankruptcy recently with a Spanish regional court.

The concessionaire – comprising local infrastructure firms Azvi, Comsa, Isolux Corsan, Sando and the investment arm of Portugal’s Banco Espirito Santo (BES) – became the first of a group of 10 troubled road operators to throw in the towel after finding itself unable to pay debts of some €380 million and about €150 million in right-of-way costs.

In a way, the AP41’s woes are symptomatic of the problems affecting the sector at large. Besides being hit with lower-than-expected traffic since the crisis hit in 2008, the AP41 had to contend with a raft of questionable government decisions, including the cancelling of a stretch with good traffic prospects and the opening of an alternative free route. Like others in the market, it also saw its original land expropriation bill virtually triple from its original €55 million.

But the AP41 differs from its peers in one important aspect: it has become the first road concession to file for bankruptcy, potentially shattering the fragile balance that had thus far existed between concessionaires, creditors and the government, as all parties sought a lasting solution to the problem.

On the government side, Spain’s transport ministry (Fomento) said it would unveil a package of measures by the end of May, which could include some €289 million in loans to help re-balance these concessionaires. Under Spanish law, it is the government that will ultimately have to foot the bill if these concessions, said to carry aggregate debt of €3 billion, collapse.

Precedent set, the real question now is whether the AP41 will trigger a wave of bankruptcies in the sector, or if it will actually force all the parties to work together that much harder to come up with a solution.